Operations services take on the heavy burden of profit—has Longfor's second engine started running?

```

Author | Zhou Zhiyu

The real estate industry has been discussing the "new model" for several years, but the number of companies that have truly emerged from the old model can be counted on one hand. Most real estate companies are still trapped in a quagmire of debt, and those few that have survived have mainly done so by shrinking operations for a breather.

On March 27, Longfor Group held its 2025 annual results conference. From the financial data, we can see Longfor is exhibiting a structural shift: while its development business is under pressure amid the industry’s winter, its operation and services segment has grown into an independently profitable unit with annual revenue close to 27 billion yuan, a gross margin above 50%, and annual profit contribution nearing 8 billion yuan.

The pressure on property development is clear. Nationwide, new home transaction volume has halved from its 2021 peak, second-hand home prices have dropped by nearly 40%, and the costs of a five-year adjustment will be concentrated in the settlement cycles of 2025 and 2026. Longfor was not spared either, recording its first core attributable profit loss in 2025. This is not just Longfor’s problem; it’s an industry-wide bill.

In 2025, Longfor’s operation and services segment achieved revenue of 26.77 billion yuan, a record high, making up 27.5% of its total revenue. This segment’s gross margin exceeded 50%, contributing a core attributable profit of 7.92 billion yuan. In other words, viewed independently, Longfor’s operation and services segment is a profitable body with annual revenue close to 27 billion yuan and a net profit margin of about 30%.

Management has provided a clearer timeline: by 2028 at the latest, operation and service revenue will exceed that of property development. By then, EBITDA from operation and services is expected to cover interest expenses fourfold.

Over the past three and a half years, Longfor has reduced interest-bearing debt by 60 billion yuan, grown operational property loans to over 100 billion yuan, and produced positive operating cash flow for three consecutive years. By the end of 2025, interest-bearing debt will drop to 152.8 billion yuan, and at group level, just 6 billion yuan in credit financing will mature in 2026—a sharp drop from last year’s 22 billion yuan.

Those are the broad numbers. But at the results meeting, an easily overlooked detail emerged: under Longfor’s operation and services segment, its four channels—commercial investment, asset management, property services, and intelligent construction—each have different strategies and circumstances.

Paradise Walk (Tianjie) commercial is the absolute mainstay of Longfor’s operations, with 99 malls, a 97% occupancy rate, rental income of 11.2 billion yuan, and 2025 turnover up 17% year-on-year. This is a money-making machine that has already proven itself.

The property services channel, however, experienced a round of proactive contraction. Revenue was about 11.2 billion yuan, declining slightly year-on-year, as Longfor voluntarily withdrew from a batch of projects with excessively low fees and capacities. Management says the adjustment is basically complete and expects to return to double-digit growth in 2026.

The asset management channel has upgraded from Guanyu long-term rental apartments to a combination of six business formats, with plans to open about ten Chunshan Wanshu senior care apartments over the next three years.

Longhu Longzhizao, the intelligent construction channel, is something of an outlier: its 1.3 billion yuan in revenue is the smallest within the group, but in a highly competitive industry, it continues rapid development.

As Wallstreetcn understands it, over the past few years the number of project management companies has surged from just over a dozen to more than a hundred, creating intense internal competition. Projects with rates below 2% now account for 45%, and those with rates between 2%-3% surpass 36%, together making up more than 80%. A head of one such company bluntly advises real estate firms not to further crowd the project management market.

Longfor Group Chairman Chen Xuping explains Longfor’s ability to emerge from this red ocean: Longfor did not partake in irrational rate competitions, but relied on creating greater value for clients to generate returns.

When a project management business can help its client achieve good prices and accelerate sales, clients naturally are willing to pay a premium for such operational capabilities.

At a deeper level, the real moat of Longhu Longzhizao is not just proven management experience, but the synergy from its parent company’s channels. Longfor simultaneously possesses commercial operations, long-term rental apartments, property services, and digital systems—which, combined, allow Longhu Longzhizao to provide end-to-end services spanning positioning, planning, to delivery and operations. Pure project management companies can hardly replicate this kind of ecosystem.

This also aligns precisely with the industry’s direction of evolution. As the incremental market continues to shrink, asset revitalization and restructuring are becoming truly valuable high ground for the project management sector. Longhu Longzhizao has already demonstrated its capabilities in such areas—such as the restructuring and relief of the Chengdu Xijingtai project and stock commercial property renovation at Shanghai Lujiazui Jin Sui Tower—proving the point better than mere scale expansion.

Zooming out from Longhu Longzhizao to Longfor overall, a bigger narrative is taking shape.

What the company has essentially done over the past five years is defuse two bombs simultaneously: one is the debt structure, the other the business structure. The new foundation—operational property loans, positive operating cash flow, profits from operation and services—is nearing completion. As Chen Xuping put it at the results meeting: “Only after finishing the debt structure transition can we build the foundation for the new model.”

The role of Longhu Longzhizao is to prove that Longfor’s years of accumulated capabilities—digitalization, full-cycle construction and operations—can be decoupled from heavy assets, packaged as independent service products, and achieve premium pricing. This is a key link in deepening the strategic transformation chain.

Of course, Longfor’s transformation is not yet complete. 2025 to 2026 will still be a profit low point, and inventory clearance in development will require a tough fight. Management’s promise of a “return to growth in 2027” must be honored, consistent double-digit annual profit growth in operations and services realized, and Longhu Longzhizao’s ability to maintain rapid development amid industry rate declines must continue to be proven.

But at least for now, Longfor has laid out a clear path: in the depths of the industry’s harshest winter, it hasn’t survived by selling assets, but by building up operational capability—and exporting that capability externally to create value.

Longfor has provided an observable sample of the “new model” answer. As for whether this sample can become a paradigm, that will require time and results to tell.

Risk Warning and DisclaimerThe market carries risks; be prudent with your investments. This article does not constitute personal investment advice and does not take into account individual users' particular investment objectives, financial circumstances or needs. Users should consider whether any opinions, views or conclusions expressed in this article are appropriate for their individual circumstances. If you invest based on this, you do so at your own risk. ```